Martin Reynolds, director of corporate accounts at edeus, explained: “If a customer walks away after taking up a loss leader two-year product, the lender will lose money. Lenders are offering retention fees as a second line of defence to their own retention strategies, not for the love of brokers.”
Reynolds also expressed an interest in knowing which lenders offering retention fees have halted their own strategies.
He said while it believed the client always belonged to the broker, some lenders believed that, upon completion, the client belonged to the lender, which would contact the client directly when their deal ended.
Paul Fincham, senior media relations officer at Halifax, responded: “We have a statutory obligation to contact borrowers at various points before their deal comes to a close and invite them to renew their policy with us, but brokers can get in touch with them at the same time.
“We believe in creating a level playing field. Firstly, by offering the same products to new and existing customers and secondly, asking brokers to consider our products against others in the market when it comes to renewal.”
Reynolds also argued that retention fees could be detrimental to the broker market.
He said: “Once the customer has been advised to retain their mortgage with a lender two or three times, they will get used to believing that lender can provide the best deal and may begin to question the advice they receive from their broker.”
Anthony Badaloo, manager at Church Hill Finance, commented: “ In more established markets like Australia and America, retention fees have proven their worth without cutting out the broker. While an uptake in the schemes could reduce the frequency of people remortgaging, resources would be freed up to concentrate on other things. No retention fee policies serve nobody particularly well.”
